Most Gulf markets edged down yesterday with investors cutting risk as new worries emerged in Europe after Spain’s borrowing costs shot up, but low trading volumes limited losses.
Saudi Arabia’s index lost 0.3%, erasing early-session gains, to end at 7,033 points, taking losses this month to 7%.
“Issues in Europe and seasonal effects of the summer and then Ramadan will slow down the market,” said Faisal Al-Othman, portfolio manager at Riyadh-based Arab National Bank.
“We had a good performance earlier this year and it’s time to retrace downwards to 6,800 levels, which is a strong support. The market will stay within a range of 6,800 and 7,200 points over the coming months.”
The benchmark topped 7,900 points in early April, its highest level in three-and-a-half-years as retail money poured into the market.
The heavyweight sectors of petrochemicals and banks ended lower with the respective benchmarks down 0.3 and 0.6%.
Growing doubts about Spain’s plan to recapitalise its banks and obtain finance for its struggling regional governments unnerved investors globally, including the Middle East.
Dubai’s bourse fell for a third session in five, down 0.1% and Abu Dhabi’s index closed at a four-month trough as investors cut risk.
Dubai’s heavyweights dragged the market down with Emirates NBD and Emaar Properties closing 1.1% and 1% lower respectively.
“Dubai’s index is in a support area that could hold for a rally. But, there’s no signal for it yet,” said Bruce Powers, head of research and analysis at Trust Securities.
“Volumes have been declining on the way down and are still relatively mild. To me this indicates that sellers are not aggressively selling, giving some credence to at least a short-term rally in the near term.”
Abu Dhabi’s index eased 0.06% to its lowest close since January 31.
Elsewhere, Kuwait’s market fell for a 10th consecutive session, down 0.1% as political instability dampened sentiment.
Nayef al-Hajraf was appointed as the country’s acting finance minister, after his predecessor Mustapha al-Shamali quit amid allegations of irregularities in his department.
“It’s a surprise to see government changes at this level—it’s not a good signal,” said Sebastien Henin, portfolio manager at The National Investor. “We would play defensive stocks at this time or companies whose growth is not related to the local economy, such as petrochemicals.”
Instability at the top of government is causing delays to the country’s $110bn development plan, seen as necessary to revive its economy.
SABIC contributes to national development
The Saudi Basic Industries Corporation (SABIC) sponsored the Industrial Innovation Award which was presented to developers of new ideas for industrial projects at a ceremony held in Riyadh on May 18.